It is hard for international observers of the United States to grasp the political paralysis that grips the country, and that seriously threatens America's ability to solve its domestic problems and contribute to international problem-solving. America's governance crisis is the worst in modern history. Moreover, it is likely to worsen in the years ahead.

The difficulties that Barack Obama is having in passing his basic programme, whether in healthcare, climate change, or financial reform, are hard to understand at first glance. After all, he is personally popular, and his Democratic party holds commanding majorities in both houses of Congress. Yet his agenda is stalled and the country's ideological divisions grow deeper.

Among Democrats, Obama's approval rating in early November was 84%, compared with just 18% among Republicans. Fifty-eight percent of Democrats thought the country was headed in the right direction, compared with 9% of Republicans. Only 18% of Democrats supported sending 40,000 more troops to Afghanistan, while 57% of Republicans supported a troop buildup. In fact, a significant majority of Democrats, 60%, favoured a reduction of troops in Afghanistan, compared with just 26% of Republicans. On all of these questions, a middle ground of independents (neither Democrats nor Republicans) was more evenly divided.

Part of the cause for these huge divergences in views is that America is an increasingly polarised society. Political divisions have widened between the rich and poor, among ethnic groups (non-Hispanic whites versus African Americans and Hispanics), across religious affiliations, between native-born and immigrants, and along other social fault lines. American politics has become venomous as the belief has grown, especially on the vocal far right, that government policy is a "zero-sum" struggle between different social groups and politics.

Moreover, the political process itself is broken. The Senate now operates on an informal rule that opponents will try to kill a legislative proposal through a "filibuster" – a procedural attempt to prevent the proposal from coming to a vote. To overcome a filibuster, the proposal's supporters must muster 60 of 100 votes, rather than a simple majority. This has proved impossible on controversial policies – such as binding reductions on carbon emissions – even when a simple majority supports the legislation.

An equally deep crisis stems from the role of big money in politics. Backroom lobbying by powerful corporations now dominates policymaking negotiations, from which the public is excluded. The biggest players, including Wall Street, the automobile companies, the healthcare industry, the armaments industry, and the real-estate sector, have done great damage to the US and world economy during the last decade. Many observers regard the lobbying process as a kind of legalised corruption, in which huge amounts of money change hands, often in the form of campaign financing, in return for specific policies and votes.

Finally, policy paralysis around the US federal budget may be playing the biggest role of all in America's incipient governance crisis. The US public is rabidly opposed to paying higher taxes, yet the trend level of taxation (at about 18% of national income) is not sufficient to pay for the core functions of government. As a result, the US government now fails to provide adequately for basic public services such as modern infrastructure (fast rail, improved waste treatment, broadband), renewable energy to fight climate change, decent schools, and healthcare financing for those who cannot afford it.

Powerful resistance to higher taxes, coupled with a growing list of urgent unmet needs, has led to chronic under-performance by the US government and an increasingly dangerous level of budget deficits and government debt. This year, the budget deficit stands at a peacetime record of about 10% of GNP, much higher than in other high-income countries.

Obama so far seems unable to break this fiscal logjam. To win the 2008 election, he promised that he would not raise taxes on any household with income of less than $250,000 a year. That no-tax pledge, and the public attitudes that led Obama to make it, block reasonable policies.

There is little "waste" to cut from domestic spending, and many areas where increases in public spending are needed. Higher taxes on the rich, while justified, don't come close to solving the deficit crisis. America, in fact, needs a value-added tax, which is widely used in Europe, but Obama himself staunchly ruled out that kind of tax increase during his election campaign.

These paralysing factors could intensify in the years ahead. The budget deficits could continue to prevent any meaningful action in areas of critical need. The divisions over the wars in Iraq and Afghanistan could continue to block a decisive change in policy, such as a withdrawal of forces. The desire of Republicans to defeat the Democrats could lead them to use every manoeuvre to block votes and slow legislative reforms.

A breakthrough will require a major change in direction. The US must leave Iraq and Afghanistan, thereby saving $150bn a year for other purposes and reducing the tensions caused by military occupation. The US will have to raise taxes in order to pay for new spending initiatives, especially in the areas of sustainable energy, climate change, education, and relief for the poor.

To avoid further polarisation and paralysis of American politics, Obama must do more to ensure that Americans understand better the urgency of the changes that he promised. Only such changes – including lobbying reforms – can restore effective governance.